States Look to Cut Recovery Rights of Drivers without Auto Insurance

Bills have been introduced to the Oklahoma, Minnesota and Montana state legislatures with the intention of reducing the types–and consequently the amounts–of compensation that uninsured motorists can receive as a result of being involved in serious auto accidents.

All pieces of legislation have received favorable votes from their respective insurance committees, and the Montana Senate has already passed its bill, though narrowly.

As the law currently stands in these and the majority of other states, motorists who flout compulsory auto insurance laws and get into an accident while driving uninsured are able to sue the at-fault drivers for any type of applicable damages. But the proposed pieces of legislation would change that by limiting the types of damages uninsured motorists could sue for to strictly economic damages.

“What my bill attempts to do is to limit those damages that [uninsured drivers] can receive to just economic damages,” said Oklahoma Rep. George Faught, who introduced the legislation in his state. “That means we’re going to pay their medical bills–whatever those are–we’re going to pay their lost wages and then we’re going to repair their car. What they won’t be able to receive are those non-economic damages of pain and suffering.”

Faught authored and introduced similar legislation in 2008, but it did not make it out of the House Judiciary Committee.

Also embedded in Minnesota’s proposal is a provision that would increase the minimum fine for driving without coverage. The current fine is at least $200, but the proposal would raise that to $600.

“No pay, no play” insurance statutes began emerging in the late 1990s in order to reduce the average amounts that insurers were required to pay for damages incurred by uninsured drivers. The basic logic behind the proposals is that if the number of large settlement payouts are contained, inexpensive auto insurance is more likely to remain available.

According to the Property Casualty Insurers Association of America, eight states–Alaska, California, Iowa, Louisiana, Michigan, New Jersey, North Dakota and Oregon–already have in place “no pay, no play” statutes, although a number of them differ from the current proposals.

Louisiana’s law, instead of limiting recovery for non-economic damages, bars uninsured motorists from recovering funds for the first $15,000 of bodily injury damages and the first $25,000 of property damages. North Dakota’s law limits the application to drivers who have been convicted of driving uninsured twice previously, and Iowa’s limits the application to accidents in which the uninsured driver was committing a felony.

Most “no pay, no play” laws include exemptions for accidents in which a drunk driver was at-fault.

About John Pirro

John Pirro is a licensed fire and casualty insurance agent specializing in various aspects of the auto insurance industry. He worked in the auto body repair industry before taking a reporting position at Online Auto Insurance News.